GM’s ‘Mr. Fix-It’ Is Trying Again in Korea : Autos: Robert Stramy says a more democratic attitude will help his firm’s venture with Daewoo achieve peace with labor and compete better.
General Motors’ “Mr. Fix-it,” Robert Stramy, an executive vice president of the auto giant, sees a need for more democracy at the Daewoo Motor Co. plant he runs and in South Korea as a whole.
“We’ve got to stop the bickering. We’ve got to get together--all of South Korea. We’ve got to understand that we’re all together. That is the only way to be competitive,” Stramy said at a recent luncheon at the Foreign Correspondents Club here.
Stramy, touted as the man who resuscitated GM plants in Mexico and Van Nuys before being sent to GM’s 50-50 joint venture with Daewoo, was speaking about the waves of strikes and massive wage increases that have swamped South Korea since 1987, which have helped damage the price competitiveness of its exports.
Passenger car shipments to the United States, for example, zoomed upward through 1988 but plunged last year and are declining again this year.
A consumption boom in the protected domestic market rescued the four Korean auto makers, enabling them to increase production 2% to 1.1 million vehicles in 1989, despite a 41% drop in exports. This year, production is expected to grow again to nearly 1.3 million units, with virtually no export growth.
Auto exports, which the government in 1987 projected at 1 million units this year, are expected to reach only 365,000.
The pattern reflects South Korea’s overall economy. Despite an outlook for the first trade deficit since 1985, the GNP is heading toward a real growth rate of about 9% this year.
Through early October, strikes declined by 74% and wage settlements moderated to about 10%, compared to about 20% last year. But with inflation expected to exceed 12% in 1990, businessmen fear that demands for steep wage increases may stir up labor trouble again next year.
Stramy, who runs the Daewoo Motors plant in Pupyong, adjacent to the port city of Inchon, made it clear that he doesn’t think labor problems have ended.
The democratic movement unleashed by President Roh Tae Woo’s pledge in 1987 to transform South Korea into a democracy “has spread into the workplace,” Stramy said, noting that young Koreans are less willing to accept the traditional authoritarian attitudes. Workers “are saying, ‘Listen to me. Talk to me. Treat me with some dignity and respect, openness and honesty, as an individual as well as a member of the group.’
“If we don’t listen and if we don’t make their workplace a meaningful experience, then we do not deserve their cooperation. . . . We have to move away from ordering and more toward listening and cooperative decision making.”
Stramy also pointed to a fundamental change that affects the Korean auto industry. Koreans have followed “the Japanese strategy” of trying to enter the American market at the low end, he said. But the United States is no longer the strong, growing market it was in the 1970s, when the Japanese established a beachhead by exporting small, fuel-efficient cars.
Today, “there is no longer a ‘Big 3’ in the American market. It’s a ‘Big 5’ or a ‘Big 6,’ including Toyota, Honda and Nissan,” he said. Five or six models are offered in every segment of the market, he added.
“So I am concerned for the South Korean auto industry as a whole, and for Daewoo,” Stramy said. “I would like to caution Korean businessmen that emulating Japan is not enough. . . . A strategy of low-level entry into the American market won’t work” because no market is left for Korean cars to fill.
“Primarily, the people we’ve been selling to are first-time buyers. Two or three years later, they want to go up. But we don’t have the product.”
Hyundai’s new Sonata, he said, will give customers of Daewoo’s rival a car to “move up to” from the Hyundai Excel. Daewoo, he said, plans to follow suit and offer more products to the American market, where only its LeMans model is sold, Stramy said. Pontiac showrooms handle the Opel-designed LeMans.
Stramy, however, foresaw no dramatic comeback in exports.
“We’ve tried to follow the Japanese in strategy in exports but . . . not their processes or systems,” he complained.
The veteran plant manager praised Japan’s “dedication to people--assisting people, providing them with tools, treating them with respect and getting feedback--all put together is a total system that is mind-boggling, especially to those of us who grew up in a system that is very authoritarian.”
“In the foreseeable future, I do not see the Korean automobile industry (becoming) the next Japan. . . . I think it may take another half to a full generation to really be what we are potentially capable of being. . . . Here, in South Korea . . . we’re at the bottom of the curve in building an organizational memory and the learning experience,” because auto makers have purchased manufacturing facilities “turnkey” and “depend on others for the design and development of the product.”
A small and protected domestic market, he added, “holds back innovation.” Only now are Korean makers beginning to design and develop on their own, he added.
Stramy also criticized Korean auto makers for investing first and looking for markets afterward, a practice he said had created massive overcapacity.
“We need sufficient volume--250,000-plus for each operation--(or) we’re not going to be able to make any money,” he said. Daewoo, he added, operates on a “very low margin,” suffers an inadequate cash flow and is burdened with a “very heavy debt load.”
Stramy, nonetheless, predicted that the Korean auto industry will develop its own design and development capability and eventually emerge as a “global manufacturer.”
Top Korean executives “know what they are doing,” and Korean workers, he said, are willing “to make sacrifices, to work long hours when the purpose makes sense. They are good workers, skillful and highly educated. They learn quickly.”